A split Fourth Circuit panel held that the Hobbs Act, 28 U.S.C. § 2341 et seq. – also known as the Administrative Orders Review Act – requires district courts to defer to FCC rules interpreting the TCPA. District courts lack authority, the majority held, to apply Chevron’s two-step analysis in deciding whether to adopt such rules.

Carlton & Harris, a West Virginia chiropractic office, filed a class action against PDR Network, the publisher of a physician’s reference book. Carlton & Harris alleged that PDR violated the TCPA by sending a fax inviting it to reserve a free e-book on PDR’s website. PDR moved to dismiss the complaint on the grounds that offering a free e-book was not an “unsolicited advertisement” under the TCPA, 47 U.S.C. § 227(b)(1)(C), because the book was not for sale. Carlton & Harris responded that a 2006 FCC Rule interpreted the term “unsolicited advertisement” broadly enough to include promoting goods at no cost.

The district court sided with PDR, holding that the TCPA’s definition of the term was unambiguous under Chevron’s step one and did not include free promotions. It declined to follow the FCC’s rule.

A divided Fourth Circuit panel reversed, holding that the Hobbs Act, which gives federal appellate courts exclusive jurisdiction “to determine the validity of” FCC rules interpreting the TCPA, precluded the district court from reaching Chevron’s step one. The Hobbs Act bound the district court to apply the FCC’s rule without ever comparing it to the statute. The dissent countered that the Hobbs Act did not strip the district court of its judicial review power because it never held the rule invalid. The district court, in the dissent’s view, simply gave no deference to the rule because the statute’s plain language controlled the outcome of the case. The dissent warned against equating a decision that a statute is unambiguous with a decision that an agency’s rule is invalid.

PDR argued in its certiorari petition that the federal circuits are split on whether a district court must automatically defer to the FCC’s interpretation of the TCPA. PDR took the position that the Hobbs Act bars only facial challenges to an agency’s orders before a district court, not challenges to how an order applies to a particular set of facts.

Josh co-chairs McGuireWoods’ insurance recovery practice group and represents policyholders in connection with claims and litigation under D&O, E&O, professional liability, CGL, cyber and other types of insurance policies.